Boards and associations, just like individuals, carry insurance coverage to protect them from liability, loss and other financial and legal problems, although the issues may be a little different than the typical auto or single-family homeowners’ insurance.
When and if to file a claim, versus paying out of pocket, is always a difficult decision. Whether it’s for property damage or an injury on the premises, paying a claim can be very expensive. However, a history of claims, frivolous or otherwise, can cause a building or association to pay higher premiums and, in extreme cases, to be dropped from its insurance policy entirely,
Sherry Branson, marketing project manager for Kevin Davis Insurance, a national firm that serves New Jersey, says “Community Associations are liable for insurance claims in many areas: board elections, contracts with vendors, association finances, and employment issues are just a few areas where they can be sued.”
Ed Mackoul, president of Mackoul & Associates in Old Bridge, says that with property claims, the association should weigh the type of claim, the deductible that will be applied, and the estimated cost to repair or replace the damage. For example, he says, “If there is a fire in the laundry room and the cost to repair it is under the deducible, there probably isn’t a reason to submit it. Even if the damage exceeds the deductible, the board may want to weigh whether it’s worth submitting a claim.”
“Insurance companies,” Mackoul continues, “are in business to make money. When they start losing money on an account, their options are generally to cancel the insurance or raise the premium, so submitting a $6,000 claim when a building has a $5,000 deductible may not be in their best interest if they’ve submitted other claims in the past.”